BUSINESS BANKING COUNCIL REPORTS THE HAWAII BUSINESS COMMUNITY CONTINUES TO GROW, DESPITE DECREASING OPTIMISM OF THE STATE ECONOMY

HONOLULU - The Business Banking Council, sponsored by American Savings Bank, reports that respondents to its nineteenth Hawaii Economic Indicator Study present the Performance Indicator at 124 which is down slightly from 131 reported in the second quarter of 06. Respondents also report an Optimism level at 119 which is unchanged from the second quarter of 06, however it is twelve points lower then it was one year ago. While respondents are cautious about continued robust economic growth, with fifty four percent expecting little or no changes in the coming year, fifty-two percent of the respondents reported increases in gross revenue compared to last year and forty-six percent of respondents reported increases in before tax profit. With all of these positive financial indicators, only twenty nine percent of the respondents believe the economy will continue to improve in the coming year.

With employees getting harder and harder to attract and retain, it was not surprising to find that fifty five percent of the study respondents reported no change in their staffing levels. Even with the recruit/retain challenge in the marketplace, twenty seven percent of respondents reported an increase in staffing level compared to only twenty two percent reporting increases in the second quarter 06.

Study respondents are using a variety of tactics to help them recruit and retain high quality employees. Fifty six percent of respondents are relying heavily on prompting internal candidates by providing them with job training and increased responsibilities. Forty six percent are increasing their incentive packages for current employees as a method of reducing turnover. Thirty five percent are increasing their compensation packages.

The business community seems to have taken advantage of healthy economic conditions, despite the labor challenges. The real challenge is whether the business community is looking ahead to anticipate and prepare for the next market shift.

"At American Savings Bank, we believe it's even more important today to provide attractive compensation packages for employees both to attract good talent and retain valuable existing employees. Even the small benefits matter like our unique TechKnowledge program that reimburses employees for technology-related purchases and continuing education and provides a subsidy for high speed internet access for all employees from home," said Constance Lau, chairman, president and CEO of American Savings Bank.

Section Two- Retail Industry Focus

Retailers remain slightly more optimistic then the general study respondents and they reported a performance indicator that beat the general study respondents by one point. A higher percentage of retail respondents reported an increase in gross revenue as well as increases in before tax profit.

Twenty eight percent of retail respondents report a decline in their customer base compared to 2006 when only fourteen percent reported a decline in the customer base. The decreasing customer counts overall are perhaps impacting the composition of the retailers' customer base. Forty three percent of retail respondents say their customer base is made up entirely of Hawaii residents. Fifty two percent report their customer base is a mix of residents and visitors. Those retailers, who do rely on visitors, estimated that 19.2% of their customer mix is made up of eastbound visitors. This marks the lowest proportion of eastbound visitors in the customer mix since this question was posed to retailers in 2004 when the percentage of eastbound visitors in the customer mix was 31.2%.

Retailers are slightly more optimistic about the retail industry as a whole than they were last year. Twenty five percent of retailer respondents are very optimistic about the retail industry in the coming year. Fifty seven percent are somewhat optimistic.

While the average retail purchase amount is increasing, more and more customers are paying for those purchases with credit and debit cards. Sixty one percent of retailers polled reported an increase in credit card usage and sixty three percent report an increase in debit card use.

The 06 holiday buying season was not as productive as the 05 season. Thirty four percent of retail respondents said that sales were down compared to the 05 season. When analyzing the pattern of holiday sales results for retailers, we note a decline in those reporting increases in holiday sales for the last three years.

Web based sales is a growing part of the typical retailers' financial performance. Forty seven percent of retailers polled have a company website that sells their products to consumers. Roughly two thirds of the purchases on company websites are being made by local residents. Of those with a website, thirty two percent of retail respondents said that Internet sales represents a significant yet not major segment of their revenue. Forty percent said it is not yet an important factor in their business; however it is growing in its impact.

The Economic Indicator Study was conducted via telephone interviews with a total of 403 companies. The interviews were conducted from February 2, 2007, to February 22, 2007. The sample was broken down based on the number of employees in a company. Small businesses were divided into two sub-groups. Businesses with three to nine employees were designated as very small, and those with 10 to 49 employees were designated as small. Medium-sized firms were those with between 50 and 99 employees while companies with more than 100 employees were classified as large. A targeted sample of 100 businesses in each sector was the goal. A subset of 116 self described retail industry businesses across all sizes were asked additional questions focusing on this industry group.

The Economic Indicator Study has gathered information on the visitor industry since 2001 to better predict performance of this segment in years to come.

This series of studies is conducted to present a true picture of Hawaii's economy from a businessperson's perspective. These studies allow the Council to continually track changes among firms in Hawaii such as changes in employee numbers; changes in gross revenues and profits; and changes in disposable income and how it is used.

The Business Banking Council, sponsored by American Savings Bank, assists the business and banking community in providing products and services to help businesses grow and become more profitable. Council members represent a cross section of the business community and come from all types of industries and businesses of all sizes. The Council meets once each quarter to discuss banking products and services that could better support the business community, address economic issues that impact the community and provide advice and input to help American Savings Bank meet and exceed the expectations of its business customers.